Will 2019 be the year when S/4HANA becomes mainstream?
Will 2019 be the year when S/4HANA becomes mainstream? Arun Rangaraju, head of SAP at Mindtree, provides a view of what the year could be like.
Almost all the customers I have met in recent months have started thinking of S/4HANA and are planning to put some money behind this initiative in 2019. It’s especially true of the Fortune 50 companies who have realized that 2025 is not far away. Their biggest challenge is to create the business case. Having spent millions rolling out ECC (and some of them are yet to complete the rollouts), there is a lot of apprehension in starting a new potentially costly ERP journey. What are the alternatives available?
- Do nothing – Stay on the current ECC version and pay higher Annual Maintenance fees (if SAP provides the option) or manage it internally. In today’s times when more applications are powered by Artificial Intelligence (AI) and Machine Learning (ML), staying on ECC will soon put enterprises at a competitive disadvantage. S/4HANA provides some of these as part of the application itself and offers a platform where it will be easier to take advantage of third party applications.
- Upgrade to SAP Suite on HANA – This is like running an old car on a Formula 1 engine. The engine will want to go fast but the chassis, axles and gearbox will put limitations on it. It is a good intermediate step but to really take advantage of the HANA database, a significant amount of effort will have to go into custom code remediation. For large ECC installations that have been running for many years, this could be a substantial effort.
- Move away from SAP – The advent of Service Orientated Architecture (SOA) and microservices have led to a belief that enterprises can build an ERP that combines multiple, best-of-breed applications for areas like Finance, HR and CRM - rather than getting locked into one software vendor. This idea has been pushed by Gartner as the ‘post modern ERP’. In my view, having a small digital core (e.g. financials, P2P) and plugging in best-of-breed applications will recreate all the integration challenges that the ERP solved in the 1990s. You are better off living with slightly less functionality or usability compared to the additional cost of integration and maintenance.
Creating the S/4HANA business case – This is the tough part. The tangible business benefits will usually be working capital reduction through shorter order-to-cash cycle times and inventory reduction and faster financial close, increased customer satisfaction through higher OTIF (On time in Full) serviced orders, lower customer churn and the holy grail of all IT projects – an increase in the top line. These benefits are delivered through a combination of S/4HANA, Analytics, CRM and supply chain planning systems. E.g. we have delivered an OTIF accelerator based on SAP Leonardo that uses a combination of Mindtree’s own IP, HANA, Analytics and S/4. Click Mindtree OTIF for details. It is thus important not to look at S/4HANA in isolation.
2025 will be here sooner than we think. Whatever your way forward may be, start working on the business case to modernize your ERP and define your roadmap for the next 5 years. We have helped many of our customers across industries do this and embark on the journey.